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unfunded liabilities
pat quinn
passive income
The Illinois State Pension System Is In Trouble - Time For Plan B
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The Illinois State Pension System is In Trouble     -     Time for Plan B

I want to think positive about the Illinois State Pension System but this underfunded pension is in serious trouble. Unfortunately, this could mean big trouble for those who receive pension benefits from the State of Illinois. For those of you hoping to reach retirement and enjoy passive income for life from your Illinois State Pension you should strongly consider a Plan B. Times are changing and your contributions have not been put to good use.

The Illinois State Employees' Retirement System contains five Illinois state pension funds. In total they are among the worst underfunded pensions in the nation. Many analysts say that the Illinois State Pension system is the absolute worst in the nation and is the most underfunded today. The funded ratio for Fiscal year 2010 was only 38.3% but the state is now required to follow an employer contribution schedule that will achieve a 90% funding ratio by year 2045 and the state of Illinois is not required to begin making payments large enough to keep unfunded liabilities from growing until year 2034.

Let’s analyze this for a moment. The State of Illinois admits that the Illinois retirement system is grossly underfunded and does not even have enough money in its pension fund to pay for half of its pension liabilities but the state will not contribute enough to make up this deficit until year 2034. This actually means that Illinois state employees must wait 22 years just to have enough money contributed by the state adequate to keep additional unfunded liabilities from growing. And then between years 2034 and 2045 the state plans to have the state pension rates funded at 90%.

I don’t know about you but waiting until year 2045 just to be at 90% funded is not acceptable. On the contrary, increased employee contributions were called for immediately to help fix the problem. This is outrageous considering Illinois Governor Pat Quinn admits that past Illinois governors and General Assemblies have postponed pension payments and didn't make payments for the past three decades. However, not once has Governor Pat Quinn or any other government authority indicated that Illinois state employees failed to make one payment or were ever late on a payment to the pension plan. Since the pension system is now under higher scrutiny the state employees were mandated to increase pension contributions immediately.

Do you feel better knowing that Illinois is taking serious action to fix this financial crisis for its 700 thousand state and local government employees? Maybe we should look at more recent statistics than 2010 in order to get a more accurate sense of things moving in the right direction. The Illinois Municipal Retirement Fund website indicates that 2011 Pension investment returns for year to date September 30, 2011 is a loss of $1.5 Billion and mentions that the markets were volatile in 2011. However, in October alone the pension investment earned $1.6 billion with an overall loss of $57 million for the year 2011.

Wow, what a roller coaster ride your Illinois pension fund is taking. If you take into consideration that the state of Illinois does not have enough money to pay its bills because it has over $130 billion in debt and liabilities but only has $19 billion in annual revenue you might begin to realize why I think your Illinois State Retirement Fund is in trouble. On February 3, 2012 the stl today reported that the governor’s director David Vaught assured Illinois mayors that the state’s dire financial woes are improving. Are you ready for a pension bailout?

Just two weeks ago Governor Pat Quinn said he wants to cut Medicaid by $2 billion and yesterday The Chicago Tribune reported that the Governor plans to shut down the super-maximum prison in Tammas in addition to closing or consolidating several other correctional facilities, mental health facilities and 16 State Police telecommunication centers. This is all with a recent 67% increase in state income tax.

I want all Illinois government employees who eventually want to receive their pension and have some passive income for life to realize it is time to start taking matters into their own hands and begin their Plan B. You will never be able to dictate how the state invests your pension dollars and you will never be able to prove your money was actually stolen from your Illinois State Pension Fund. I guess you could try to prove your case but I think you know how that court case would go. I’m sure a judge would rule that the money you paid out of your earned pay check and placed into the pension fund was borrowed for some other purpose and they planned to put it back. Or the judge might discover that the state uses archaic accounting principles, like using a common pension industry practice of five year averaging to report the annual rate of return on pension investments. Most everyone will agree that this pension mess is not the Illinois government employees fault but it is too late to blame those who mismanaged the pension funds.

I am not a C.P.A. but isn’t this the same accounting methods that put the Illinois State Pension system in the hole $85 billion? I think it’s very clear that the only one who is truly concerned about the status of your Illinois pension is you. After learning the true value of the Illinois State Pension Fund I don’t think that there are many employees or retirees who have any financial security. You have the power to provide your own pension bailout plan and experience passive income for life. Others have stopped relying on government pensions and taken a different road to financial security and created their own pension bailout with a Plan B. Act now, before it’s too late.


Street Talk

Makes you really wonder about your government for sure.

Reply
  about 1 decade ago

It does for sure Shawn. Relying on one of these government pensions is not wise at this point in time. Thanks for your read and comments

Reply
  about 1 decade ago

As I said on the other article and as AJ has mentioned below, when things aren't being done properly it will at some stage hit a wall and collapse... so many countries have discovered this it surprises me a country like yours is following dodgy practices... if they think the tax payer can fund all of these schemes it's a disaster waiting to happen....

Reply
  about 1 decade ago

That disaster waiting to happen is closer than many think Rob. If more people would do their own analysis and trust their instincts they would realize that government pensions are not the answer to financial security. Thanks for the insight and comments

Reply
  about 1 decade ago
AJ  

Rob, the US politicans are more "dodgy" than you may think. I did some digging on this after reading Jay's article and this problem is all over the US and has been going on for decades. It's disgusting.

Reply
  about 1 decade ago

And here I'm thinking things like this only happen in third world countries...

  
  about 1 decade ago
AJ  

I don't understand why payments were not made every paycheck into the pension fund to begin with. Had this been done on a regular basis, Illinois (and many other states) would not be in the predicament they are in now. Robbing Peter to pay Paul is not how governments should be run and the accounting practices are just helping to hide this. Thank you, Jay for shedding light on this subject!

Reply
  about 1 decade ago

Yes, robbing Peter to pay Paul is a good analogy. Also, there are way more people at the back door of the Illinois pension plan waiting to get paid then there are people at the front door paying into the Illinois pension system. Eventually this bubble will burst like so many others and unfortunately It won't be long before it does. It's time for a pension bailout for all of the Illinois government employees and retirees.

Reply
  about 1 decade ago
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